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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-16808
SIXX HOLDINGS, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 75-2222883
(State of Incorporation) (IRS Employer Identification No.)
300 Crescent Court, Suite 1630
Dallas, Texas 75201
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (214) 855-8800
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [XX] NO [ ]
As of July 31, 2000, 1,359,274 common shares of the registrant were issued and
outstanding.
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PART I. FINANCIAL INFORMATION
The consolidated financial statements of Sixx Holdings, Incorporated
and its subsidiaries (the "Company") included herein have been prepared by the
registrant in conformity with generally accepted accounting principles. The
consolidated financial statements and information included herein are unaudited;
however, they reflect all adjustments which are, in the opinion of management,
necessary to reflect a fair presentation of the Company's financial position as
of June 30, 2000 and the results of operations for the interim three-month and
six-month periods ending June 30, 2000 and 1999. Reference is made to Notes to
Unaudited Consolidated Financial Statements found elsewhere in this document for
additional information concerning the consolidated financial statements.
Management is responsible for the fairness and reliability of the
consolidated financial statements and other financial data included in this
report. In the preparation of the consolidated financial statements, it is
necessary to make informed estimates and judgments based on currently available
information of the effects of certain events and transactions.
The Company maintains accounting and other controls which management
believes provide reasonable assurance that financial records are reliable,
assets are safeguarded, and that transactions are properly recorded in
accordance with management's authorizations. However, limitations exist in any
system of internal control based upon the recognition that the cost of the
system should not exceed benefits derived.
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ITEM 1. FINANCIAL STATEMENTS
SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(ROUNDED TO NEAREST HUNDRED, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
(UNAUDITED)
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH $ 93,700 $ 63,300
ACCOUNTS RECEIVABLE 64,800 68,900
RECEIVABLE FROM AFFILIATE 55,400 46,100
INVENTORIES 93,200 93,100
PREPAID EXPENSES 73,400 63,200
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TOTAL CURRENT ASSETS 380,500 334,600
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PROPERTY AND EQUIPMENT (NET) 1,280,300 1,360,900
OTHER ASSETS 11,800 11,800
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$ 1,672,600 $ 1,707,300
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 74,400 $ 62,900
ACCRUED LIABILITIES 247,900 248,300
PAYABLE TO AFFILIATES 408,900 549,300
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TOTAL CURRENT LIABILITIES 731,200 860,500
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DEFERRED RENT LIABILITIES 29,300 30,400
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TOTAL LIABILITIES 760,500 890,900
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STOCKHOLDERS' EQUITY:
COMMON STOCK OF $.01 PAR VALUE:
AUTHORIZED 12,000,000 SHARES; 1,359,274
SHARES ISSUED AND OUTSTANDING 13,600 13,600
ADDITIONAL PAID-IN CAPITAL 4,408,900 4,408,900
ACCUMULATED DEFICIT (SINCE AUGUST 1, 1989) (3,510,400) (3,606,100)
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TOTAL STOCKHOLDERS' EQUITY 912,100 816,400
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$ 1,672,600 $ 1,707,300
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</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(ROUNDED TO NEAREST HUNDRED, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
RESTAURANT REVENUES $1,979,400 $ 1,936,100 $3,726,700 $ 3,562,000
COSTS AND EXPENSES:
COST OF SALES 569,800 555,400 1,082,800 1,023,200
RESTAURANT EXPENSES 1,021,700 1,033,200 1,999,300 1,950,600
DEPRECIATION AND AMORTIZATION 67,100 94,200 135,900 185,200
GENERAL AND ADMIN. EXPENSES 199,200 192,100 414,300 364,500
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TOTAL COSTS AND EXPENSES 1,857,800 1,874,900 3,632,300 3,523,500
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INCOME (LOSS)
FROM OPERATIONS 121,600 61,200 94,400 39,400
NONOPERATING INCOME (EXPENSE):
INTEREST EXPENSE - STOCKHOLDER 0 (6,000) 0 (14,100)
OTHER INCOME, NET 1,500 700 1,300 300
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NET INCOME (LOSS) $ 123,100 $ 55,900 $ 95,700 $ 25,600
========== =========== ========== ===========
INCOME (LOSS) PER COMMON SHARE -
BASIC AND DILUTED $ 0.09 $ 0.04 $ 0.07 $ 0.02
========== =========== ========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 1,359,274 1,359,274 1,359,274 1,359,274
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(ROUNDED TO NEAREST HUNDRED)
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<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 95,700 $ 25,600
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 135,900 185,200
CHANGES IN ASSETS AND LIABILITIES:
ACCOUNTS RECEIVABLE 4,100 6,300
RECEIVABLE FROM AFFILIATE (9,300) --
INVENTORIES (100) (4,800)
PREPAID EXPENSES (10,200) 7,000
ACCOUNTS PAYABLE 11,500 (16,100)
ACCRUED LIABILITIES (400) 7,000
PAYABLE TO AFFILIATES (140,400) 6,600
DEFERRED RENT LIABILITIES (1,100) (1,100)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 85,700 215,700
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CASH FLOWS USED IN INVESTING ACTIVITIES:
ADDITIONS TO PROPERTY AND EQUIPMENT (55,300) (26,900)
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CASH FLOWS USED IN FINANCING ACTIVITIES:
REPAYMENT OF NOTES PAYABLE TO STOCKHOLDER, NET 0 (232,000)
PAYMENTS OF CAPITAL LEASE OBLIGATIONS 0 (1,200)
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NET CASH USED IN FINANCING ACTIVITIES 0 (233,200)
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NET INCREASE (DECREASE) IN CASH 30,400 (44,400)
CASH AT BEGINNING OF PERIOD 63,300 127,400
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CASH AT END OF PERIOD $ 93,700 $ 83,000
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</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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SIXX HOLDINGS, INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(1) BASIS OF PRESENTATION
In the opinion of management of the Company, all adjustments (all of
which are normal and recurring) have been made which are necessary to
present fairly the accompanying consolidated financial statements. The
Company's interim financial statements should be read in conjunction
with its annual financial statements included on Form 10-KSB.
(2) ACCOUNTING POLICIES
During the interim periods presented, the Company has followed the
accounting policies set forth in its consolidated financial statements
and related notes thereto, included in its 1999 Annual Report on Form
10-KSB. Such document should be referred to for information on
accounting policies and further financial details.
Certain previously reported financial information has been reclassified
to conform to the current presentation.
(3) RELATED PARTY TRANSACTIONS
The Company charges its majority shareholder and his affiliates on a
time-incurred basis for certain shared general and administrative
resources. Such charges to the major stockholder and his affiliates
reduced the Company's general and administrative expenses by $118,800
for each of the six month periods ended June 30, 2000 and 1999. The
Company subleases office space in the majority shareholder's office on
a month-to-month basis. Under this arrangement, the Company paid
$38,250 and $49,800 to the majority shareholder for the six months
ended June 30, 2000 and 1999, respectively.
(4) SEGMENT INFORMATION
The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 131, "Disclosures about Segment of an Enterprise
and Related Information" which requires that public enterprises
disclose certain information about their operating segments and the
geographic areas in which the enterprise operates.
The Company has identified its two Italian concept restaurants as
operating segments and aggregates those segments and its corporate
operations into a single reporting segment.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company owns and operates two upscale Italian restaurants. Patrizio
I, located in Dallas, Texas, was opened in 1989 and Patrizio II, located in
Plano, Texas was opened in 1994.
CAPITAL RESOURCES AND LIQUIDITY
As of June 30, 2000 and 1999 the Company's cash was approximately
$93,700 and $83,000, respectively. Management believes that sales at the current
annual levels will provide sufficient cash flow to fund operations at existing
restaurants for the foreseeable future.
RESULTS OF OPERATIONS
Revenues from restaurant operations increased from $3,562,000 to
$3,726,700, or 4.6%, for the six months ended June 30, 2000 and 1999,
respectively. This increase is primarily attributable to increased cover counts
at both restaurants. Patrizio I accounted for 58.2% and 55.7% of the total
revenues for the six month periods ended June 30, 2000 and 1999, respectively.
Cost of sales as a percent of restaurant revenues increased from 28.7%
in 1999 to 29.1% in 2000. This increase was due to higher food costs during the
first six months of 2000 as compared to the same period in the prior year.
Restaurant expenses for the six-month period ended June 30, 2000
increased $48,700, or 2.5%, over the same period in 1999 due to increased wage
costs.
Depreciation and amortization were $135,900 for the six months ended
June 30, 2000 and $185,200 for the six months ended June 30, 1999.
General and administrative expenses for the six month period ended June
30, 2000 increased $49,800, or 13.7%, over the same period in 1999. This was due
primarily to increased expenditures for personnel, including contract labor and
developer and royalty fees.
Interest expense - stockholder decreased from $14,100 during the first
six months of 1999 to $0 for the same period of 2000 because the notes were paid
in full at December 31, 1999.
Income from operations for the six months ended June 30, 2000 was
$94,400 compared to income of $39,400 for the same period in the prior year. Net
income increased from $25,600 in 1999 to $95,700 in 2000 due to increased
revenues.
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IMPACT OF INFLATION
The Company is subject to the effect of inflation on its restaurant
labor, food and occupancy costs. The Company employs workers who are paid hourly
rates based upon the federal minimum wage. Operating margins at the restaurant
level have been maintained through rigorous food cost control, procurement
efficiencies and infrequent menu price adjustments. The costs of taxes,
maintenance and insurance all have an impact on the Company's occupancy costs,
which continue to increase during the period. Management believes the current
practice of maintaining operating margins through a combination of small menu
price increases and cost controls, careful evaluation of property and equipment
needs, and efficient purchasing practices are the most effective means to manage
the effects of inflation, including increases in the minimum wage.
SEASONALITY
The Company's business is somewhat seasonal in nature, with restaurant
revenues being stronger in the spring and autumn when patrons can be seated
comfortably on each restaurant's outdoor patio.
ACCOUNTING MATTERS
In June 1998, Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities," was issued.
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. As amended by SFAS No. 137, the
provisions of SFAS No. 133 are effective for fiscal years after June 15, 2000,
although early adoption is allowed. The Company does not expect the adoption of
this Statement to have a material impact on the Company's financial conditions
or reported results of operations.
FORWARD-LOOKING STATEMENTS
Certain of the statements made in this report are forward-looking
statements that involve a number of risks and uncertainties. Statements that
should generally be considered forward- looking include, but are not limited to,
those that contain the words "estimate," "anticipate," "in the opinion of
management," "believes," and similar phrases. Among the factors that could cause
actual results to differ materially from the statements made are the following:
general business conditions in the local market served by the Company's
restaurants, competitive factors such as changes in the locations, menus,
pricing or other aspects of competitors' operations, the weather in each of the
locations, expense pressures relating to labor and supplies, and unanticipated
general and administrative expenses, including the costs of additional
acquisitions, expansion or financing.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Reports on Form 8-K: None
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SIXX HOLDINGS, INCORPORATED
By: /s/ Jack D. Knox
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Jack D. Knox, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities and
the dates indicated.
SIGNATURE TITLE DATE
/s/ Jack D. Knox Chairman of the Board, August 12, 2000
------------------------------ President and Director
Jack D. Knox (Principal Executive
Officer)
/s/DeAndra Trepagnier Chief Financial Officer August 12, 2000
------------------------------ (Principal Financial and
DeAndra Trepagnier Accounting Officer)
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INDEX TO EXHIBITS
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<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
27 Financial Data Schedule
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